-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q+i/bfk5mW38qnXqNcmAfH6/bWDkXrPhfu0x38N0zEKeN2WvnAkb65EqHodWQgAH M6XOwWZkPcZWQKAu57DkrQ== 0000950116-97-000908.txt : 19970514 0000950116-97-000908.hdr.sgml : 19970514 ACCESSION NUMBER: 0000950116-97-000908 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970513 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CLEAN DIESEL TECHNOLOGIES INC CENTRAL INDEX KEY: 0000949428 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-CHEMICALS & ALLIED PRODUCTS [5160] IRS NUMBER: 061393453 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-27432 FILM NUMBER: 97601725 BUSINESS ADDRESS: STREET 1: 300 ATLANTIC ST CITY: STAMFORD STATE: CT ZIP: 06901 BUSINESS PHONE: 2034259830 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______ Commission file number: 0-27432 ------- CLEAN DIESEL TECHNOLOGIES, INC. (Exact name of registrant as specified in its charter) Delaware 06-1393453 -------- ---------- (State of Incorporation) (I.R.S. Employer Identification No.) Clean Diesel Technologies, Inc. 300 Atlantic Street - Suite 702 Stamford, CT 06901-3522 (Address of principal executive offices) (Zip Code) (203) 327-7050 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] As of May 13, 1997, there were outstanding 2,516,666 shares of Common Stock, par value $0.05 per share, of the registrant. ======================================================================== CLEAN DIESEL TECHNOLOGIES, INC. (A Development Stage Company) Form 10-Q for the Quarter Ended March 31, 1997 INDEX
Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Balance Sheets as of March 31, 1997 1 and December 31, 1996 Statements of Operations for the Three 2 Months Ended March 31, 1997 and 1996 and for the Period from January 1, 1992 through March 31, 1997 Statements of Cash Flows for the Three 3 Months Ended March 31, 1997 and 1996 and for the Period from January 1, 1992 through March 31, 1997 Note to Financial Statements 4 Item 2. Management's Discussion and Analysis of 6 Financial Condition and Results of Operations PART II. OTHER INFORMATION Item 1. Legal Proceedings 8 Item 2. Changes in Securities 8 Item 3. Defaults on Senior Securities 8 Item 4. Submission of Matters to a Vote of Security Holders 8 Item 5. Other Information 8 Item 6. Exhibits and Reports on Form 8-K 8 SIGNATURES
Part I - FINANCIAL INFORMATION Item 1. Financial Statements CLEAN DIESEL TECHNOLOGIES, INC. (A Development Stage Company) BALANCE SHEETS
March 31, December 31, 1997 1996 ------------ ----------- (Unaudited) Assets Current assets: Cash and cash equivalents $ 1,943,000 $ 3,270,000 Short-term investments 2,029,000 2,000,000 Inventories 118,000 103,000 Other current assets 303,000 222,000 ------------ ----------- Total current assets 4,393,000 5,595,000 Other assets 81,000 82,000 ------------ ----------- Total assets $ 4,474,000 $ 5,677,000 ============ =========== Liabilities and stockholders' equity Current liabilities: Accounts payable and accrued expenses $ 716,000 $ 741,000 Loan payable to Fuel-Tech N.V. 495,000 745,000 ------------ ----------- Total current liabilities 1,211,000 1,486,000 Stockholders' equity: Preferred stock, par value $.05 per share, authorized 100,000 shares, no shares issued and outstanding -- -- Common stock, par value $.05 per share, authorized 5,000,000 shares, issued and outstanding 2,516,666 and 2,500,000 shares 126,000 125,000 Additional paid-in capital 11,187,000 11,155,000 Deficit accumulated during development stage (8,050,000) (7,089,000) ------------ ----------- Total stockholders' equity 3,263,000 4,191,000 ------------ ----------- Total liabilities and stockholders' equity $ 4,474,000 $ 5,677,000 ============ ============ See note to financial statements.
-1- CLEAN DIESEL TECHNOLOGIES, INC. (A Development Stage Company) STATEMENTS OF OPERATIONS (Unaudited)
Period from Three Months Ended January 1, 1992 March 31 through 1997 1996 March 31, 1997 ----------- ----------- -------------- Sales $ 40,000 $ -- $ 40,000 Costs and expenses: Cost of sales 23,000 -- 23,000 General and administrative 496,000 457,000 3,808,000 Research and development 457,000 224,000 3,789,000 Patent filing and maintenance 75,000 56,000 776,000 ----------- ----------- ----------- Loss from operations 1,011,000 737,000 8,356,000 Interest income (64,000) (116,000) (480,000) Interest expense to Fuel-Tech N.V. 14,000 15,000 174,000 ----------- ----------- ----------- Net loss during development stage $ 961,000 $ 636,000 $ 8,050,000 =========== =========== ============ Net loss per common share $ 0.38 $ 0.25 N/A =========== =========== ============ Average number of common shares outstanding 2,512,000 2,500,000 N/A =========== =========== ============ See note to financial statements.
-2- CLEAN DIESEL TECHNOLOGIES, INC. (A Development Stage Company) STATEMENTS OF CASH FLOWS (Unaudited)
Period from Three Months Ended January 1, 1992 March 31 through 1997 1996 March 31, 1997 ---------- ----------- -------------- Operating activities Net loss $ (961,000) $ (636,000) $(8,050,000) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 6,000 2,000 18,000 Issuance of stock purchase warrants 30,000 -- 60,000 Changes in operating assets and liabilities: Inventories (15,000) (28,000) (118,000) Other current assets (81,000) (76,000) (303,000) Accounts payable and accrued expenses (25,000) (57,000) 716,000 Other assets -- (18,000) (18,000) Due to Fuel-Tech N.V. -- 381,000 -- ---------- ----------- ----------- Net cash used in operating activities (1,046,000) (432,000) (7,695,000) ---------- ----------- ----------- Financing activities Proceeds from Rights Offering, net of $630,000 of brokerage commissions in 1995 -- 2,018,000 11,156,000 Expenses of Rights Offering -- -- (425,000) Repayment of expenses of Rights Offering paid by Fuel-Tech N.V. -- -- (200,000) Issuance of common stock to parent -- -- 250,000 Net parent company investment -- -- 469,000 Proceeds of loan from Fuel-Tech N.V. -- -- 2,874,000 Repayment of loan to Fuel-Tech N.V. (250,000) -- (2,379,000) Proceeds from exercise of stock options 3,000 -- 3,000 ---------- ----------- ----------- Net cash (used in) provided from financing activities (247,000) 2,018,000 11,748,000 ---------- ----------- ----------- Investing activities Purchase of short-term investments -- -- (2,000,000) Accrued interest on short-term investments (29,000) -- (29,000) Purchase of fixed assets (5,000) (20,000) (81,000) ---------- ----------- ----------- Net cash used in investing activities (34,000) (20,000) (2,110,000) Net (decrease) increase in cash and cash equivalents (1,327,000) 1,566,000 1,943,000 Cash and cash equivalents at beginning of period 3,270,000 6,848,000 -- ---------- ----------- ----------- Cash and cash equivalents at end of period $1,943,000 $ 8,414,000 $ 1,943,000 ========== =========== =========== See note to financial statements.
-3- CLEAN DIESEL TECHNOLOGIES, INC. NOTE TO FINANCIAL STATEMENTS MARCH 31, 1997 (Unaudited) BASIS OF PRESENTATION The accompanying unaudited, condensed, consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal recurring nature. Operating results for the three month period ended March 31, 1997 are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1996. Clean Diesel Technologies, Inc. ("CDT" or the "Company") is a development stage enterprise and its efforts from January 1, 1992 through March 31, 1997 have been devoted to the research and development of a platinum fuel catalyst ("PFC") for internal combustion engines and NOx reduction systems for diesel engines, some of which are licensed to the Company by Fuel Tech. There were no material activities related to the Company's business prior to 1992. The Company's PFC technology will require additional research and development testing to determine its commercial viability. The Company's management believes that the Company has adequate capital to fund its operations through March 31, 1998 but that additional financing will be required in the future to commercialize its technologies. In 1996 and 1997 net loss per common share is based on the average number of shares of common stock outstanding during each period. Common equivalent shares are not included in the per share calculations where the effect of their inclusion would be antidilutive. EARNINGS PER SHARE In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings Per Share, which is required to be adopted by the Company as of December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements, primary earnings per share will be replaced with basic earnings per share. In computing basic earnings per share the dilutive effect of stock options will be excluded. The impact of Statement 128 on the computation of primary earnings per share (to be replaced with basic earnings per share) and fully diluted earnings per share is not expected to be material. SHORT-TERM INVESTMENTS In June, 1996, the Company purchased a discount note of the United States Federal Home Loan Bank. The note matures in June, 1997, and has a yield to maturity of 5.84%. The Company intends to hold this investment until its maturity. INVENTORIES Inventories are stated at the lower of cost or market and consist of finished product. -4- WARRANTS TO PURCHASE COMMON SHARES In March 1997, in consideration of his undertaking to assist the Company in obtaining sources of permanent financing, the Company granted a director of the Company a warrant to purchase 25,000 shares of the Company's Common Stock for $10.00 per share, a 142% premium over fair value. The warrant expires on March 17, 2004. Included in the Company's Statement of Operations for the three months ended March 31, 1997 is $30,000 of expense related to the grant of this warrant. -5- CLEAN DIESEL TECHNOLOGIES, INC. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations FORWARD-LOOKING STATEMENTS Statements in this Form 10-Q which are not historical facts, so-called "forward-looking statements," are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that all forward-looking statements involve risks and uncertainties, including those detailed in the Company's filings with the Securities and Exchange Commission. See Item 1 "Risk Factors of the Business" and also Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Form 10-K for the year ended December 31, 1996. RESULTS OF OPERATIONS Sales and Cost of Sales for the first quarter of 1997 related to the Company's first commercial sale. General and administrative expenses increased to $496,000 in the first quarter of 1997 from $457,000 in the first quarter of 1996. The increase was due to a small increase in administrative personnel, management being associated with the Company on a full-time basis, and the lease of the Company's separate office for the entire first quarter of 1997. Research and development expenses for the first quarter of 1997 increased to $457,000 from $224,000 in the first quarter of 1996. In the 1997 period, the Company completed the testing on its PFC for gasoline-fueled vehicles in conjunction with Holt Lloyd International Ltd., performed additional engine testing on its PFC as required by the EPA of all fuel additives, and funded the development and testing of certain NOx control technologies. Additionally, the first quarter of 1997 included payroll and related expenses of three senior technical employees hired during the last nine months of 1996. Patent filing and maintenance expenses were $75,000 in the first quarter of 1997, and $56,000 in the first quarter of 1996. The increase in the first quarter of 1997 was due in part to the preparation and filing of new patent applications, both in the United States and overseas. Interest income decreased to $64,000 in the first quarter of 1997 from $116,000 in the first quarter of 1996. The decrease was due to lower cash balances in the first quarter of 1997 versus 1996. LIQUIDITY AND SOURCES OF CAPITAL The Company is a development stage company and has incurred losses since inception aggregating $8,050,000 at March 31, 1997. The Company expects to incur losses through the foreseeable future as it further pursues its research and development efforts and the commercialization of its products. In December 1995, the Company raised approximately $10.5 million, net of offering expenses and broker dealer commissions of approximately $1.3 million, through a Rights Offering of its shares by Fuel Tech. Approximately $2 million of this amount was received in January, 1996. -6- Total cash, cash equivalents and short-term investments were approximately $4.0 million and $5.3 million at March 31, 1997 and December 31, 1996, respectively. Working capital at March 31, 1997 was approximately $3.2 million, a decrease of approximately $900,000 from December 31, 1996. The decrease in cash, cash equivalents, short-term investments and working capital was the result of funds used to fund the Company's operations in the first three months of 1997. The Company believes that it has sufficient cash balances to fund its requirements through March 31, 1998. The Company will, however, require additional financing in the future, and expects to meet its future cash needs through private placements or a secondary offering of its shares. The amount management seeks to raise will depend on the Company's stock price, market conditions, and the status of the development and commercialization of the Company's technologies. However, there is no guarantee that the Company will be able to raise such capital on terms satisfactory to the Company. -7- Part II. OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Defaults on Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K a. Exhibits 10(h) - Management and Services Agreement between Registrant and Fuel Tech, Inc. as of June 1, 1996 b. Reports on Form 8-K None -8- CLEAN DIESEL TECHNOLOGIES, INC. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CLEAN DIESEL TECHNOLOGIES, INC. Date: May 13, 1997 By: /s/Jeremy D. Peter-Hoblyn ------------------------------------------ Jeremy D. Peter-Hoblyn President and Chief Executive Officer Date: May 13, 1997 By: /s/Scott M. Schecter ------------------------------------------ Scott M. Schecter Vice President and Chief Financial Officer EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 1,943,000 2,029,000 0 0 118,000 4,393,000 0 0 4,474,000 1,211,000 0 0 0 126,000 3,137,000 4,474,000 40,000 40,000 23,000 0 1,011,000 0 0 (961,000) 0 0 0 0 0 (961,000) (.38) 0
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